JetBlue Airways Corporation (JetBlue Airways) (New York) today reported its results for the fourth quarter and full year 2014:

Operating income of $169 million in the fourth quarter. This compares to operating income of $115 million in the fourth quarter of 2013. For the full year 2014, JetBlue reported operating income of $515 million. This compares to operating income of $428 million in 2013.

Pre-tax income of $140 million in the fourth quarter. This compares to pre-tax income of $77 million in the fourth quarter of 2013. For the full year 2014, on a GAAP basis JetBlue reported pre-tax income of $623 million. Excluding special items1, pre-tax income in 2014 was $382 million; this compares to pre-tax income of $279 million for the full year 2013.

On a GAAP basis, net income for the fourth quarter was $88 million. Excluding special items1, net income was $87 million, or $0.26 per diluted share. This compares to JetBlue’s fourth quarter 2013 net income of $47 million, or $0.14 per diluted share. For the full year 2014, on a GAAP basis, JetBlue reported net income of $401 million. Excluding special items1, net income was $232 million, or $0.70 per diluted share; this compares to net income of $168 million, or $0.52 per diluted share for the full year 2013.

Financial Performance

JetBlue reported record fourth quarter operating revenues of $1.4 billion. Revenue passenger miles for the fourth quarter increased 8.5% to 9.4 billion on a capacity increase of 7.0%, resulting in a fourth quarter load factor of 82.1%, an increase of 1.2 points year over year.

Yield per passenger mile in the fourth quarter was 14.13 cents, down 1.5% compared to the fourth quarter of 2013. Passenger revenue per available seat mile (PRASM) for the fourth quarter 2014 decreased 0.1% year over year to 11.61 cents and operating revenue per available seat mile (RASM) decreased 1.0% year over year to 12.64 cents.

Operating expenses for the quarter increased 2.1%, or $27 million, over the prior year period. Interest expense for the quarter declined 9.3%, or $3 million, as JetBlue reduced its debt throughout the year. JetBlue’s operating expense per available seat mile (CASM) for the fourth quarter decreased 4.5% year over year to 11.17 cents. Excluding fuel and profit sharing, fourth quarter CASM2 decreased 0.9% to 7.23 cents.

Operational Performance

JetBlue’s operations improved throughout 2014. System on time departures, or D0, improved 2.7 points year-over-year while system arrival performance, or A14, improved 2.5 points. JetBlue had particularly strong operations in the fourth quarter. D0 and A14 each improved roughly four points year-over-year in the quarter.

Fuel Expense and Hedging

In the fourth quarter JetBlue had in place hedges for approximately 26% of its fuel consumption and managed approximately 7% of its fuel consumption using fixed forward price agreements (FFPs). This resulted in a realized fuel price of $2.70 per gallon, a 12.9% decrease versus fourth quarter 2013 realized fuel price of $3.10. JetBlue recorded $26 million in losses on fuel hedges settling during the fourth quarter.

JetBlue has hedged approximately 20% of its first quarter 2015 projected fuel requirements using a combination of jet fuel swaps and collars. Based on the fuel curve as of January 16th, JetBlue expects an average price per gallon of fuel, including the impact of hedges and fuel taxes, of $1.97 in the first quarter. For the balance of the year beyond the first quarter, JetBlue has hedged approximately 16% of projected fuel consumption.

Liquidity and Cash Flow

JetBlue ended the quarter with approximately $708 million in unrestricted cash and short term investments, or 12% of trailing twelve month revenue. In addition, JetBlue maintains $600 million in undrawn lines of credit.

During the fourth quarter, JetBlue repaid approximately $130 million in regularly scheduled debt and capital lease obligations, bringing annual debt payments to $778 million. JetBlue anticipates paying approximately $265 million in regularly scheduled debt and capital lease obligations in 2015 and plans to continue to opportunistically prepay other debt. JetBlue expects to pay approximately $52 million in regularly scheduled debt and capital lease obligations in the first quarter of 2015.

First Quarter and Full Year Outlook

The following outlook does not include the impact of Winter Storm Juno, which caused flight cancellations this week.

For the first quarter of 2015, CASM excluding fuel and profit sharing is expected to decrease between (1.5)% and (3.5)% versus the year-ago period. Excluding fuel and profit sharing, CASM for the full year 2015 is forecasted to grow between zero and two percent year over year.

Capacity is expected to increase between 11% and 13% in the first quarter 2015 and between 7.0% and 9.0% for the full year, in line with guidance provided at JetBlue’s Investor Day in November. Severe winter weather caused the cancellation of about 4,100 flights in the first quarter of 2014. This increases JetBlue’s 2015 capacity growth rate compared to a scheduled versus scheduled basis by about 4% in the first quarter and 1% for the full year.

Notes

(1) Pre-tax and net income excluding special items are non-GAAP financial measures that we use to measure our core performance. Note A provides a reconciliation of non-GAAP financial measures used in this release and provides the reasons management uses those measures.

(2) Consolidated operating cost per available seat mile, excluding fuel and profit sharing (CASM Ex-Fuel and Profit Sharing) is a non-GAAP financial measure that we use to measure our core performance. Note A provides a reconciliation of non-GAAP financial measures used in this release and provides the reasons management uses those measures.

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A320-232 N639JB (msn 2814) lands at focus city Long Beach, California.

JetBlue aircraft slide show:

http://airlinersgallery.smugmug.com/Airlines-UnitedStates-2/Airlines-UnitedStates-2/JetBlue-Airways

JetBlue Airways (New York) wants to add international routes from its noise-sensitive focus city of Long Beach, California. The airline has started initial discussions with the city but faces an uphill battle to gain international routes at LGB.

Read the full report from the Press-Telegram: CLICK HERE

In other news, JetBlue today issued this strategy statement to retain shareholder value:

JetBlue Airways today outlined a long-term plan to drive shareholder returns through new and existing initiatives aimed at enhancing the Company’s product advantage and service-oriented culture while delivering improved financial results. The revenue initiatives are expected to collectively generate more than $400 million in annual operating income on a run rate basis beginning in 2017.

Additionally, JetBlue announced the deferral of 18 Airbus aircraft scheduled for delivery from 2016-2018 to 2022-2023 which will reduce capital expenditures by more than $900 million through 2017 and allow the airline to optimize its fleet to better match capacity with demand.

Robin Hayes, JetBlue’s President, said, “We believe the plan laid out today benefits our three key stakeholders. It delivers improved, sustainable profitability for our investors, the best travel experience for our customers and ensures a strong, healthy company for our Crewmembers. As we focus on executing this plan, JetBlue’s core mission to Inspire Humanity and its differentiated model of serving underserved customers remain unchanged.”

JetBlue is committed to maintaining its competitive cost position. Specifically, JetBlue announced it will maintain unit cost (excluding fuel and profit sharing) growth below two percent through 2017 with longer-term gains from a number of avenues including gradually upgauging the fleet with larger A321s on order and increasing the number of seats on its A320 fleet as part of a major cabin refresh.

“Today we announced actions that we’ve been working for some time to enhance JetBlue’s revenue performance, control costs and reduce capital commitments through 2017,” said Mark Powers, JetBlue’s Chief Financial Officer. “As we execute this plan and continue to grow, we also seek to drive significantly improved returns for our shareholders. We believe our strategy, in combination with the additional initiatives discussed today, keep us on a path to enhance long-term shareholder value.”

The initiatives discussed by JetBlue leadership included:

Fare Families / Branded Fares — Beginning in the first half of 2015, customers will be able to choose between three branded fare bundle options. The first of these will be designed for customers who do not plan to check a bag, while the latter two will offer one and two free checked bags, respectively, along with other attractive benefits, including additional TrueBlue points and increased flexibility. This new merchandising platform will enable JetBlue to tailor its offering to individual customers’ needs in a way that is simple and transparent.

Airbus A320 Cabin Refresh — JetBlue will build on the successful launch of its Airbus A321 fleet, which has been received with great customer acclaim, by outfitting its A320 aircraft with a similar refreshed cabin. The reconfigured cabin plan for the A320 will preserve JetBlue’s product advantage and highly-rated customer experience while helping to generate higher returns. Using lighter, more comfortable seats, JetBlue will be able to increase the number seats on its planes while continuing to offer the most legroom in coach. Retrofits of the Airbus A320 fleet are expected to begin in mid-2016 and will also include larger seatback screens with more entertainment options and power ports accessible to all Customers.

Mint — JetBlue’s new premium service, which is exceeding expectations in its ramp up on the JFK-SFO and JFK-LAX routes, is significantly improving transcontinental margin performance. JetBlue plans to continue rolling out additional Mint service in JFK-LAX through the fourth quarter of 2014 and in JFK-SFO through the first quarter of 2015.

Fly-Fi — JetBlue customers will continue to enjoy free access to the fastest in-flight Wi-Fi product in the industry while the company pursues a unique new monetization strategy including partnerships with Verizon, the Wall Street Journal, Time, and others. The entire Airbus A320/A321 fleet is expected to have Fly-Fi in the first half of 2015, with Embraer 190 installations beginning thereafter.

Even More — With dynamic pricing, JetBlue’s extra legroom product continues to offer customers industry-leading comfort and value and represents a growing source of ancillary revenue.

Is this the right decision? Will it turn off its loyal customers? Read the analysis by Bloomberg Businessweek: CLICK HERE

Copyright Photo: Michael B. Ing/AirlinersGallery.com. Airbus A320-232 N592JB (msn 2259) in the Barcode design lands at Long Beach.

JetBlue Airways aircraft slide show: 

Current routes from LGB: